Casimer Zablocki v. Merchants Credit Guide Co. ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 19-2045
CASIMER ZABLOCKI and REGINA JOHNSON, individually and on
behalf of all others similarly situated
Plaintiffs-Appellants,
v.
MERCHANTS CREDIT GUIDE CO.,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 18-cv-8489 — Rebecca R. Pallmeyer, Chief Judge.
____________________
ARGUED JUNE 2, 2020 — DECIDED JULY 28, 2020
____________________
Before FLAUM, KANNE, and BRENNAN, Circuit Judges.
KANNE, Circuit Judge. As its name suggests, the Fair Debt
Collection Practices Act (“FDCPA”) prohibits debt collection
practices that are “unfair.” 15 U.S.C. § 1692f. This case tests
the bounds of that term.
Casimer Zablocki and Regina Johnson received medical
services and did not remit their parts of the bills. The medical-
2 No. 19-2045
service providers turned to Merchants Credit Guide for debt
collection, and Merchants eventually reported the unpaid
debts to a consumer reporting agency. When Merchants
reported the debts, it listed separately the debt for each
medical-service charge. Zablocki and Johnson sued
Merchants on the theory that reporting the obligations
separately, rather than aggregating them together, was an
“unfair” way to collect the debts under § 1692f of the FDCPA.
The district court dismissed this theory as unsupported by
the FDCPA’s prohibition of “unfair or unconscionable”
means to collect a debt. 15 U.S.C. § 1692f. We affirm.
I. BACKGROUND
In 2013, Casimer Zablocki obtained medical services that
included several x-rays administered by Medical-Midwest
Imaging Professionals. Medical-Midwest billed Zablocki for
the x-ray services, and after his insurance provider covered
some of the costs, Zablocki was left owing a certain amount
on each x-ray charge. A couple of years passed without
Zablocki remitting his share of the bills. As a result, Medical-
Midwest turned to Merchants Credit Guide for debt
collection. After about two years without success collecting
the debts, Merchants reported to a consumer reporting
agency, TransUnion, that Zablocki owes four debts of $50,
$62, $70, and $210, corresponding to each x-ray charge.
Regina Johnson’s story is similar. She received medical
services from Medical-Elmhurst Memorial Healthcare, who
billed Johnson for the services. Johnson ended up owing
various sums on ten medical-service charges, which went into
default. Medical-Elmhurst turned to Merchants Credit Guide
for debt collection, placing the debts with Merchants at
No. 19-2045 3
various times over a couple of years. Two more years passed
without Merchants successfully collecting the debts.
Merchants then reported to TransUnion that Johnson owes
ten debts ranging from $84 to $3,603.1
Zablocki filed a complaint against Merchants for alleged
violations of the FDCPA. He alleged that by reporting the
obligations separately, rather than aggregated together,
Merchants violated the FDCPA in two ways: first, Merchants
falsely represented the “character … of any debt,” which is
prohibited under § 1692e(2)(A); and second, Merchants used
an “unfair or unconscionable means” to collect or attempt to
collect a debt, which is prohibited under § 1692f. 15 U.S.C.
§§ 1692e(2)(A), 1692f.
Shortly after Zablocki filed this complaint, we decided
Rhone v. Medical Business Bureau, LLC, 915 F.3d 438 (7th Cir.
2019). In that case, we held that reporting debts separately,
rather than aggregated together, does not misrepresent the
“character” of a debt under § 1692e(2)(A). Id. at 440. Zablocki
accordingly abandoned his challenge under § 1692e. He and
Johnson then filed an amended complaint asserting a
challenge under § 1692f only. Merchants moved to dismiss
that complaint for failure to state a claim.
The district court granted Merchants’s motion, dismissing
the action without prejudice and allowing the plaintiffs to file
an amended complaint. The plaintiffs instead appealed the
court’s dismissal of the action.
1 The ten reported debts were $84; $96; $96; $196; $198; $248; $558;
$678; $3,175; and $3,603.
4 No. 19-2045
II. ANALYSIS
We begin with a jurisdictional matter. When the district
court dismissed the action without prejudice, it gave the
plaintiffs 30 days to replead. On the last day of that repleading
window, the plaintiffs filed their notice of appeal. Concerned
about the finality of the district court’s order, we asked the
parties to address our appellate jurisdiction. See 28 U.S.C.
§ 1291 (granting courts of appeals jurisdiction over appeals
from “final decisions” of the district courts).
We are now confident that we have jurisdiction. After the
plaintiffs filed their notice of appeal, and before the time to
replead expired, no activity took place in the district court; the
plaintiffs did not file an amended complaint within the 30
days allotted to do so. Consequently, the district court’s order
became a “final decision” when the 30 days for repleading
lapsed. Id.; see Shott v. Katz, 829 F.3d 494, 496 (7th Cir. 2016);
Albiero v. City of Kankakee, 122 F.3d 417, 419–20 (7th Cir. 1997).
Satisfied of our jurisdiction, we turn to the merits: Did the
plaintiffs state a claim under § 1692f of the FDCPA? We
review this inquiry de novo, taking all well-pleaded factual
allegations as true and drawing all reasonable inferences in
the plaintiffs’ favor. Roberts v. City of Chicago, 817 F.3d 561, 564
(7th Cir. 2016).
To survive a motion to dismiss, a plaintiff must state a
claim that is “plausible on its face.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007). That happens when the factual
allegations, coupled with the exhibits incorporated into the
complaint, allow the court to draw a reasonable inference that
the defendant is liable. See Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009); Williamson v. Curran, 714 F.3d 432, 435–36 (7th Cir.
No. 19-2045 5
2013). In making this determination, we “need not accept as
true statements of law or unsupported conclusory factual
allegations.” Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir.
2013). And when the plaintiff relies on a document attached
to the complaint and does not deny its accuracy, the facts
communicated by that document control over allegations to
the contrary. See Williamson, 714 F.3d at 445–46.
The plaintiffs based their challenge solely on § 1692f of the
FDCPA. That section prohibits not only eight enumerated
examples of unfair debt-collection conduct, but also more
generally “unfair or unconscionable means to collect or
attempt to collect any debt.” 15 U.S.C. § 1692f. The plaintiffs
rely on that more general prohibition in asserting the
following theory: Rather than reporting as a single
aggregated debt the total quantity owed to each creditor,
Merchants reported separately the amounts that Zablocki and
Johnson owed on each medical-service charge. Had
Merchants reported the obligations aggregated together,
Zablocki’s and Johnson’s credit scores would have been
higher. By reporting the obligations separately, Merchants
leveraged the resulting lower credit scores to collect the debts.
This was an “unfair or unconscionable” way, under § 1692f,
to collect or attempt to collect the debts.
We begin our evaluation of this theory by addressing a
discrepancy between the plaintiffs’ allegations; the FDCPA’s
definition of “debt”; and the documents attached to the
complaint, which the plaintiffs use to support their challenge.
Zablocki and Johnson allege that they each owed “a single
debt” to each creditor, explaining that the entire balance
reported by Merchants was “owed to a single medical
provider.” But the plaintiffs also acknowledge that “debt”
6 No. 19-2045
carries the meaning provided by § 1692a(5) of the FDCPA,
which defines “debt” on a per-transaction, rather than a per-
creditor, basis:
The term “debt” means any obligation or alleged obligation
of a consumer to pay money arising out of a transaction in
which the money, property, insurance, or services which are
the subject of the transaction are primarily for personal,
family, or household purposes, whether or not such
obligation has been reduced to judgment.
15 U.S.C. § 1692a(5) (emphasis added). The plaintiffs also
acknowledge that the obligations Merchants reported to
TransUnion correspond to individual medical-service
charges. For example, the four amounts reported for
Zablocki’s medical services reflect obligations for different x-
ray services. Finally, the plaintiffs attached to their complaint
TransUnion consumer reporting documents, which indicate
that the reported amounts were not all charged as a single
transaction. For each reported obligation, the documents list
dates, including when the debt was placed for collection and
the estimated month and year when the debt will be removed
from the credit report.2 Those dates, in the attached
documents, are not all the same for each separately reported
amount.
2 After a certain period of time, debts become stale, with the statute of
limitations barring collection lawsuits. See generally Pantoja v. Portfolio
Recovery Assocs., LLC, 852 F.3d 679 (7th Cir. 2017) (discussing attempts to
collect debts by suing or threatening to sue to collect a consumer debt
when the applicable statute of limitations bars such a lawsuit). Also,
consumer reporting agencies must remove certain information from credit
reports after specified periods of time have passed. See 15 U.S.C. § 1681c.
No. 19-2045 7
We thus do not accept the plaintiffs’ allegation that the
separately reported obligations owed to each medical-service
provider comprised a single “debt,” as the FDCPA defines
that term. Cf. Rhone, 915 F.3d at 439 ($60 co-pay per physical-
therapy session, which added up to $540 owed to a creditor,
constituted nine debts of $60 each).3
The next aspect of the plaintiffs’ challenge we address has
to do with their assertions about “tradelines” and “accounts.”
The plaintiffs allege that Merchants reported as separate
“accounts” Zablocki’s unpaid charges that were all part of the
same “account” with his medical-service provider. The
plaintiffs did not make an analogous allegation, in their
complaint, regarding Johnson’s obligations. But they allege
that for both Zablocki’s and Johnson’s debts, Merchants’s
separate reporting of unpaid charges caused the plaintiffs’
credit reports to display multiple “tradelines” instead of a
single “tradeline” reflecting the total sum owed to a creditor.
The terms “account” and “tradeline” are used by
TransUnion to describe its business policies. “Account” is also
used in the Fair Credit Reporting Act. See, e.g., 15 U.S.C.
§§ 1602(k), 1603. But the FDCPA and relevant regulations do
not define these terms or use them to prohibit debt-collection
practices. It may be that TransUnion has a duty to correct any
errors in the implementation of its policies. See 15 U.S.C.
§ 1681i(a). And TransUnion could have a grievance against
Merchants for noncompliance with those policies. But § 1692f
is not “an enforcement mechanism” for other rules of law,
including any that turn on TransUnion’s vocabulary. Beler v.
3 In their brief responding to Merchants’s motion to dismiss, the
plaintiffs agreed with Merchants that this case is factually similar to Rhone.
8 No. 19-2045
Blatt, Hasenmiller, Leibsker & Moore, LLC, 480 F.3d 470, 474 (7th
Cir. 2007); cf. Rhone, 915 F.3d at 440. See generally 12 C.F.R. 1022
(providing governing regulations for the Fair Credit
Reporting Act).
The plaintiffs recognize that the information reported on
each charge (including the amounts owed) was correct. And
following our decision in Rhone, the plaintiffs do not allege
that the separate reporting misrepresented the “character” of
the debts, 15 U.S.C. § 1692e(2)(A). Ultimately, then, the
plaintiffs’ theory stands on the proposition that § 1692f
creates a certain rule—a rule that “fair” or “conscionable”
debt-collection behavior requires collectors, when reporting
debts to a consumer reporting agency, to aggregate together
multiple debts owed to a single creditor. Whether § 1692f
supplies this rule is a matter of statutory interpretation
centering on the phrase “unfair or unconscionable.” 15 U.S.C.
§ 1692f. We approach this matter by viewing the alleged debt-
collector conduct through the eyes of an unsophisticated but
reasonable consumer. See Turner v. J.V.D.B. & Assocs., Inc., 330
F.3d 991, 997 (7th Cir. 2003).
Although the catch-all phrase at issue—“unfair or
unconscionable means to collect or attempt to collect” a debt,
15 U.S.C. § 1692f—is “as vague as they come,” that does not
mean it has unlimited scope, Todd v. Collecto, Inc., 731 F.3d 734,
739 (7th Cir. 2013) (quoting Beler, 480 F.3d at 474). See Miljkovic
v. Shafritz & Dinkin, P.A., 791 F.3d 1291, 1308 (11th Cir. 2015)
(“A catch-all is not a free-for-all.”). Indeed, a term doesn’t
have to carry unbounded or vast meaning to have uncertain
application to a particular factual situation.
The FDCPA does not define “unfair” or “unconscionable”
apart from providing eight illustrative examples of “unfair or
No. 19-2045 9
unconscionable means” to collect or attempt to collect a debt.
15 U.S.C. § 1692f. The statute specifies that the examples do
not “limit[] the general application” of the “unfair or
unconscionable means” provision, leaving the full list of
permissible applications unannounced. None of the eight
listed examples address separate-versus-aggregate reporting
of debts. Here is the full text:
A debt collector may not use unfair or unconscionable
means to collect or attempt to collect any debt. Without
limiting the general application of the foregoing, the
following conduct is a violation of this section:
(1) The collection of any amount (including any interest,
fee, charge, or expense incidental to the principal
obligation) unless such amount is expressly authorized
by the agreement creating the debt or permitted by law.
(2) The acceptance by a debt collector from any person
of a check or other payment instrument postdated by
more than five days unless such person is notified in
writing of the debt collector’s intent to deposit such
check or instrument not more than ten nor less than
three business days prior to such deposit.
(3) The solicitation by a debt collector of any postdated
check or other postdated payment instrument for the
purpose of threatening or instituting criminal
prosecution.
(4) Depositing or threatening to deposit any postdated
check or other postdated payment instrument prior to
the date on such check or instrument.
(5) Causing charges to be made to any person for
communications by concealment of the true purpose of
the communication. Such charges include, but are not
limited to, collect telephone calls and telegram fees.
10 No. 19-2045
(6) Taking or threatening to take any nonjudicial action
to effect dispossession or disablement of property if—
(A) there is no present right to possession of the
property claimed as collateral through an
enforceable security interest;
(B) there is no present intention to take possession of
the property; or
(C) the property is exempt by law from such
dispossession or disablement.
(7) Communicating with a consumer regarding a debt
by post card.
(8) Using any language or symbol, other than the debt
collector’s address, on any envelope when
communicating with a consumer by use of the mails or
by telegram, except that a debt collector may use his
business name if such name does not indicate that he is
in the debt collection business.
15 U.S.C. § 1692f.
Zablocki and Johnson argue that the final two examples
relate to their theory and thus show that Merchants’s separate
reporting of debts falls within the general provision’s reach.
They reason that the examples about postcard and extraneous
envelope markings have to do with a person’s image or credit
reputation, and a debtor looks less creditworthy when
obligations on his or her credit report are listed separately
instead of aggregated together on a single line.
Regardless whether aggregating debts together makes a
debtor appear more creditworthy, the specific prohibitions of
postcard notifications and extraneous envelope markings do
not bring separate reporting within the general prohibition of
No. 19-2045 11
“unfair or unconscionable” debt-collection means. The
postcard and envelope examples prohibit collectors from
exposing a person’s indebtedness on the parts of mail that are
visible without opening an envelope. See Preston v. Midland
Credit Mgmt., Inc., 948 F.3d 772, 783 (7th Cir. 2020). By
contrast, reporting debts aggregated, rather than separately,
does not prevent exposure of a person’s indebtedness. Either
way the debts are reported, the consumer’s indebtedness is
reported to the consumer reporting agency. And, again, the
plaintiffs do not contest the accuracy of the reported amounts.
Nor do they allege that Merchants reported the debts to
TransUnion without first communicating with Zablocki and
Johnson.
So, the listed examples of “unfair or unconscionable” debt-
collection behavior do not create the rule on which the
plaintiffs rely—that when a debt collector reports debts, the
debts owed to a creditor must be reported in the aggregate.
Nor do administrative proceedings supply such a rule.
Congress initially authorized the Federal Trade
Commission to issue advisory opinions on the scope of vague
statutory terms like “unfair” and “unconscionable,” and to
enforce compliance with the FDCPA. See Pub. L. No. 95-109,
§ 814, 91 Stat. 874, 881–81 (1977); see also Beler, 480 F.3d at 473.
But we have found no advisory or enforcement opinions
bearing on the specific question before us. And, as we’ve
opined before, the agency’s commentary on what may qualify
as “unfair” conduct is unpersuasive and unhelpful. See Todd,
731 F.3d at 739; McMillan v. Collection Prof’ls, Inc., 455 F.3d 754,
764 (7th Cir. 2006) (observing that the agency’s test for acts
that may be “unfair” appears to “preclude recovery for some
12 No. 19-2045
of the very conduct explicitly prohibited as ‘unfair or
unconscionable’ by the statute”).
Similarly, Congress later granted the Consumer Financial
Protection Bureau authority to enforce compliance with the
FDCPA and to “prescribe rules with respect to the collection
of debts by debt collectors, as defined in [the FDCPA].” 15
U.S.C. § 1692l(d); see Pub. L. No. 111-203, § 1089, 124 Stat.
1376, 2092–93 (2010) (codified at 15 U.S.C. § 1692l(b)(6)). But
we have found no rules about whether debts to a single
creditor should be reported in the aggregate. Cf. Rhone, 915
F.3d at 439. Compare 12 C.F.R. 1022, 1022.42 (implementing the
Fair Credit Reporting Act), with 12 C.F.R. 1006 (implementing
the FDCPA). See generally 84 Fed. Reg. 23274 (May 21, 2019)
(notice of proposed rules governing activities of debt
collectors); 85 Fed. Reg. 12672 (Mar. 3, 2020) (supplemental
notice of proposed rules).
This leaves us largely “on our own” in answering whether
§ 1692f prohibits separate reporting of debts. Rhone, 915 F.3d
at 440.
We conclude the answer is “no.” We arrive at this
conclusion based on the plain meaning of “unfair” and
“unconscionable” in the context of the FDCPA, and the
policy-laden questions embedded in the rule that the
plaintiffs ask us to declare.
The FDCPA, as a whole, addresses fairness between debt
collectors and consumers, and between debt collectors who
employ abusive practices and those who do not. See 15 U.S.C.
§ 1692(e) (stating purposes of the FDCPA “to eliminate
abusive debt collection practices by debt collectors” and “to
insure that those debt collectors who refrain from using
No. 19-2045 13
abusive debt collection practices are not competitively
disadvantaged”).
The ordinary meaning of “unfair” is “marked by injustice,
partiality, or deception: unjust, dishonest.” Webster’s Third
New Int’l Dictionary 2494 (1976);4 see also LeBlanc v. Unifund
CCR Partners, 601 F.3d 1185, 1200 (11th Cir. 2010).
“Unconscionable” has a similar meaning: “not guided or
controlled by conscience: unscrupulous”; “excessive,
exorbitant”; “lying outside the limits of what is reasonable or
acceptable: shockingly unfair, harsh, or unjust: outrageous.”
Webster’s at 2486; cf. Black’s Law Dictionary 1367 (West
Special Deluxe 5th ed. 1979) (defining “unconscionability,”
regarding contracts, as involving terms “unreasonably
favorable” to one party and “gross overall one-sidedness”).
Viewing Merchants’s separate reporting of debts from the
perspective of an unsophisticated but reasonable consumer,
we see the alleged conduct as falling outside the scope of these
terms. It is reasonable, and not at all deceptive or outrageous,
for a collector to report individually debts that correspond to
different charges, thereby communicating truthfully how
much is owed on each debt. Some consumers may prefer to
have their debts reported in a way that conceals debt-specific
information, like how much is owed on individual debts,
when specific debts were incurred, and which debts are stale.
Those consumers may be willing to forego the more detailed
information on their credit reports if the aggregated reporting
increases their credit scores.
4 Congress enacted the FDCPA in 1977. See Pub. L. No. 95-109, 91 Stat.
874 (1977).
14 No. 19-2045
But a preference does not necessarily equal an injustice,
partiality, or deception. And the debt-reporting rule that the
plaintiffs propose would conceal debt-specific information
that other consumers may prefer, or be entitled, to see on their
credit reports. See Rhone, 915 F.3d at 439 (recognizing that
aggregated reporting could be misleading). The case before
us illustrates the point: had Merchants reported in the
aggregate all the debts owed to each creditor, Zablocki’s and
Johnson’s credit reports would not indicate the amounts of
each separate debt; when each debt would be removed from
the credit report; or other features specific to each obligation.
A consumer may find this information valuable or necessary
to manage his or her debts. Cf. Fields v. Wilber Law Firm, P.C.,
383 F.3d 562, 566 (7th Cir. 2004) (concluding that collector’s
failure, in a dunning letter, to separate attorney fees from
other obligation was misleading and unfair to consumers,
impairing their ability to knowledgeably assess debt validity).
If sorting through and weighing these competing interests
ultimately shows the plaintiffs’ proposed “aggregation” rule
to be a wise public policy, then the adoption of that rule
should be done by Congress or through the administrative
process. Section 1692f does not create that rule on its own.
And the courts are not the proper body to issue that rule.
III. CONCLUSION
Because the district court was correct to dismiss the
complaint for failure to state a claim, we AFFIRM.